EURO
The euro lost marginal ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5740 level and was capped around the $1.5835 level. Technically, today’s intraday high and low were right around the 76.4% and 61.8% retracements of the move from $1.6020 to $1.5280, respectively. Traders bid the common currency higher after the release of EMU-15 flash June consumer price inflation data that printed at 4.0%, up from May’s 3.7% level and above expectations. The European Central Bank is expected to lift its main refinancing rate by 25bps to 4.25% on Thursday and today’s elevated inflation data have many traders speculating the ECB may be forced to raise rates more than one this year. Data released in Germany today saw May wholesale sales down 0.9% m/m and 0.8% y/y. In U.S. news, NYMEX crude oil futures for August delivery traded above the US$ 143 figure, an all-time record high. Many economists believe the U.S. is on the edge of a technical recession and the elevated prices of oil and gasoline are reducing final private demand. U.S. Treasury Secretary Paulson reaffirmed the U.S.’s long-standing strong dollar policy saying “I would agree that a strong dollar is a good thing and I believe it is in our nation's interest.” Paulson will meet European Central Bank member Weber tomorrow in Germany. The Chicago June PMI survey printed stronger-than-expected at 49.6. Euro bids are cited around the $1.5645/ $1.5230 levels.
JPY / CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥105.00 figure and was capped around the ¥106.45 level. Technically, today’s intraday low was right around the 61.8% retracement of the move from ¥102.65 to ¥108.55. Traders await tonight’s Bank of Japan Tankan corporate sentiment survey tonight with most anticipating a further decline in corporate sentiment. The yen reversed course and appreciated overnight after Moody’s Investors Service raised its credit rating on yen-denominated Japanese government bonds to Aa3 from A1, raising demand for yen. The Japanese government confirmed it did not officially intervene in the foreign exchange markets this month. Data released in Japan overnight saw May housing starts fall 6.5% y/y while May construction orders were off 25.2% y/y. The Nikkei 225 stock index lost 0.46% to close at ¥14,481.38. Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥166.10 level and was capped around the ¥168.10 level. The British pound and Swiss franc depreciated vis-à-vis the yen as the crosses tested bids around the ¥209.40 and ¥103.45 level, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8543 in the over-the-counter market, down from CNY 6.8622 and the pair’s lowest close since the yuan revaluation of July 2005. People’s Bank of China Governor Zhou reported “We have several choices of using monetary policy, including open market operations, central bank bills, reserve requirements, interest rates, and the others.”
STERLING
The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5740 level and was capped around the $1.5835 level. The pair reached its highest level since 23 April. Data released in the U.K. today saw Hometrack June house prices decline for the ninth consecutive month, off 1.0% m/m and -3.2% y/y. Also, Bank of England reported May mortgage approvals came in at 42,000, the lowest number since at least 1999 while BSA reported May mortgage approvals fell to ₤2.34 billion from ₤3.19 billion. Lastly, final May M4 money supply growth was unrevised at 0.4% m/m and 10.9% y/y. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7895 level and was capped around the ₤0.7935 level.
SWISS
The Swiss franc appreciated marginally vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0130 level and was capped around the CHF 1.0205 level. Technically, today’s intraday low was right around the 50% retracement of the move from CHF 0.9645 to CHF 1.0625. U.S. dollar bids are cited around the CHF 1.0135 level. The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6040 and CHF 2.0210 levels, respectively.
